South Korea’s Kumho Petrochemical Co. anticipates an operating income milestone of $1 billion this year as tire replacement cycle in the world’s largest auto market coupled with surge in single-use latex groves in pandemic environment bodes well for its mainstay product of synthetic rubber.

Kumho Petrochemical is the largest producer in Korea with an annual capacity of 256,000 tons of styrene-butadiene rubber (SBR) for tires.

The company for the first three months delivered an operating profit of 612.5 billion won ($546.1 million) with record sales of 1.85 trillion won thanks to solid performance across the board. Revenue from the synthetic rubber business, in particular, reached 765.9 billion won after gaining 63 percent from the previous year, feeding more than 40 percent to the total revenue.

Demand for replacement tires is rising fast in China. Sales of replacement tires in the country expanded 24 percent in January, 77 percent in February and 34 percent in March.

“A tire is replaced usually in eight years. The previous replacement demand growth was made in 2012-2013,” said an industry source. “Demand started picking up last year, but supplies were interrupted due to lockdowns. With the rapid rollouts of Covid-19 vaccines, tires will be fast replaced in China.”

Expectations for a demand growth for original equipment (OE) tires also are growing.

The export prices of butadiene (BD) tires and SBR tires surged by 58 percent and 41 percent, respectively on year last month in Korea, according to industry sources. The margin from SBR tires has exceeded $1,000 per ton this year.

“Kumho Petrochemical’s operating profit is forecast to increase at least 10 percent on quarter in the April-June period and expand throughout the year to hit above 1 trillion won for full year,” said an industry official.

Kumho Petrochemical shares fell 3.55 percent to 285,500 won by midday Friday after closing the previous session 9.63 percent higher at 296,000 won.

By Lee Yoon-jae and Lee Ha-yeon

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]